Activation of Autonomous Dispute Resolution Organization Between Franchise Headquarters and Store Owners

Fair Trade Commission Announces 'Guidelines for Establishing and Operating Franchise Autonomous Dispute Resolution Organizations'

Chairman Jo Sung-wook of the Korea Fair Trade Commission visited the reception desk for the Good Franchise Movement set up at the Korea Fair Trade Mediation Agency in Jung-gu, Seoul, on April 10 last year, and spoke with representatives of franchise headquarters participating in the Good Franchise Movement. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Moon Chaeseok] The government has prepared guidelines to activate voluntary dispute resolution between franchisors and franchisees.

The Fair Trade Commission announced the "Guidelines for the Establishment and Operation of Internal Voluntary Dispute Resolution Organizations by Franchisors" on the 3rd.

The Fair Trade Commission reported that the number of dispute resolution applications in the franchise sector surged from 593 cases in 2016 to 815 cases in 2019.

Considering the increased management difficulties due to the novel coronavirus disease (COVID-19), it was judged that a culture of voluntary dispute resolution should spread.

The resolution organization resolves civil and administrative disputes such as violations of franchise-related laws, contract termination and compensation due to personal circumstances of franchisees, urging contract performance and claims for damages, and disputes over business areas among multiple franchisees.

Source=Korea Fair Trade Commission

First, the organization is divided into an operating committee and a secretariat. The operating committee is to be composed of three or more members, including a chairperson, at least one franchisor representative, and at least one franchisee representative.

To ensure fairness, the chairperson shall be a third party who is neither a franchisor nor a franchisee, and the number of franchisor representative members (executive level or higher) and franchisee representative members shall be equal.

The chairperson and members are selected with the consent of both the franchisor and the franchisee (or their organizations). The term of office is up to two years (extendable by agreement).

The operating committee meetings are divided into regular meetings and ad hoc meetings. Regular meetings are held according to a predetermined schedule, and ad hoc meetings are held irregularly for agenda items recognized as necessary by the chairperson.

The dispute resolution procedure is defined in seven steps: 'application receipt → preliminary investigation → preliminary consultation → notification of receipt → deliberation → recommendation of resolution → notification.'

It is a principle to complete dispute resolution within 60 days from the date of application receipt, but the period can be extended to a predetermined period with the consent of both parties.

If the parties accept the recommendation, an obligation to comply is imposed. The secretariat is responsible for monitoring compliance.

Jeon Seongbok, head of the Franchise Trade Division at the Fair Trade Commission, said, "We hope the guidelines will establish themselves as a more objective standard manual for voluntary dispute resolution organizations and serve as a foundation to activate the establishment of such organizations."

He added, "For companies that adopt the guidelines, we plan to increase incentives for adoption by reflecting this in the win-win agreement evaluation, among other measures."

This content was produced with the assistance of AI translation services.